NSW MARKET OVERVIEW
NEW SOUTH WALES
Tim Grosmann - State Director, Commercial Sales NSW | Savills Australia
free periods or fit-out contributions will ever be as sweet as a softer cap rate or higher returns to investors... From a developer’s perspective, what opportunities exist in your market, and how should they be positioning themselves to capitalise on these opportunities in 2025? Developers who can navigate higher funding costs will find opportunities in mixed-use and build-to-rent (BTR). Sites with flexible zoning and embedded infrastructure are in demand, while those reliant on speculative demand will need a compelling angle (or deep pockets). Based on discussions with vendors and potential vendors, how are they observing market dynamics in your region, and to what extent do you expect an increase in properties coming to market this year? The gap between vendor expectations and buyer constraints is closing …SLOWLY!! Distressed sales are set to continue to be prevalent across all sectors as the fallout from Covid and interest rates finally land. Both private and institutional players are bracing for a busier second half post-election, with stock levels rising off the back of refinancing pressures, capital recycling, and strategic exits. The deals will be there - but only for those who know where to look and how to move quickly. With interest rates stabilising or potentially easing in 2025, what impact do you foresee on the commercial property sector? A stabilised rate environment brings much-needed confidence back to the market. While a rate cut would be welcome (and celebrated), stability alone is enough to reignite transaction volumes. Pricing will remain under pressure, but the depth of capital waiting on the sidelines should ensure liquidity. Where do you anticipate cap rates will land in 2025 relative to 2024, and how will pricing trends influence buyer and seller behaviour? Cap rates will plateau in H1, with some firming in select sectors later in the year if funding conditions
Looking ahead to 2025, what’s your outlook for the commercial property sector, considering economic conditions, interest rate trends, and investor sentiment? 2025 is shaping up to be the year of cautious optimism. With interest rates stabilising (or at least no longer throwing our forecasts into chaos), investors are starting to shake off the hesitancy that defined 2024. Sentiment is improving, but discipline remains the theme – buyers are willing to deploy capital, but only for the right opportunities. Reflecting on conversations with buy-side clients, what’s their sentiment, and which buyer profiles do you anticipate will be most active this year? Private capital remains in the driver’s seat, with small funds, family offices, and HNWIs making the most of reduced competition from institutional players. Developers with strong balance sheets are circling well-located sites, ready to move when the numbers stack up. Institutional buyers remain selective, but we anticipate a return of bigger-ticket transactions, particularly as offshore groups deploy capital with renewed confidence. The ‘wait-and-see’ crowd is shrinking - 2025 is the year for those with conviction. What fundamentals are investors prioritising before deploying capital in 2025, and which asset classes do you anticipate will drive transaction activity? It’s all about income security and upside potential. Investors are targeting assets with strong tenant covenants, rental growth, and inflation protection. Industrial remains the golden child (our Industrial Team continues to remind us), while neighbourhood retail continues to attract attention, with non- discretionary spending keeping cash flow steady. Office remains a tale of two markets—premium- grade and well-located CBD assets are holding firm, while B-grade and suburban landlords will need to sharpen their pencils and get creative with deal sweeteners. And let’s be honest - no amount of rent-
TIM GROSMANN
28 – February / March 2025
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